From a Social Security press release:
I hope this doesn't cause problems. Programs used to compute payroll have to have the correct FICA wage cap. There will be problems if those programs aren't corrected.
In October of each year, the Social Security Administration announces adjustments that take effect the following January that are based on the increase in average wages. Based on the wage data Social Security had at the time of the October 13, 2017, announcement, the maximum amount of earnings subject to the Social Security tax (taxable maximum) was to increase to $128,700 in 2018, from $127,200 in 2017. The new amount for 2018, based on updated wage data reported to Social Security, is $128,400. ...This is odd. Why wouldn't Social Security have had the correct data as of October 13, 2017? It looks like someone goofed but the goof may have happened outside the Social Security Administration. In fact, it sounds like they're saying that someone else, perhaps Treasury, gave them incorrect information.
I hope this doesn't cause problems. Programs used to compute payroll have to have the correct FICA wage cap. There will be problems if those programs aren't corrected.
6 comments:
Well, it says the corrected W2s were provided by "by a national payroll service provider," which doesn't sound like Treasury. I always assumed wage data came from the IRS, but perhaps not. So is the "payroll service provider" outside the government? I think this is a bad idea, if it is the case.
Also, the Social Security press release is not accurate as far as the effects of the change. The error changed the average wage index (AWI), which will be used to index all wages for 2016 (each person's wages for each year are divided by the AWI for that year, and the top 35 values are then multiplied by the AWI for the year the person turns 60). For people born in 1956, the change in the AWI will lead to a proportional change in their benefits. Granted, it is a small change, but so is the change in the taxable maximum.
It says one of the national payroll providers revised half a million w2's from 2016, so that's who goofed.
A few years ago they also wound up revising the wage index downward because no one at IRS noticed one or two guys had been submitting (fake) W2's in the amount of $1 billion every 2 weeks. Social Security's actuaries caught the mistake.
These are the same national payroll providers that Section 824 of the Bipartisan Budget Act of 2015 allows SSA to contract with to get wage data the agency will use to change people's SSI and SSDI benefits.
If those contracts had been in force now, how many of those half-million W2s that were too high would have created overpayments for people with disabilities? How would beneficiaries been able to challenge them effectively?
So I guess "payroll service providers" provide services to employers, not the government as I had assumed. Anyway, it seems the one here messed up bad. I think the average reported wage would have to be about $7,400 off per W2 for 500,000 W2s to move the AWI as much as it did (assuming 1 W2 per person. This is based on 163,521,000 workers and the fact that the AWI moved from $48664.73 to $48,642.15, a $22.58 drop from correcting one W2 in every 327 (since some people work more than one job, the total number of W2s should be more than the number of workers, so this number should be higher).
The Bipartisan Budget Act authorizes the agency to use real-time wage data to determine monthly benefits. It is designed to prevent improper payments by allowing the agency to get real-time wage info instead of waiting on individuals to report, or waiting on quarterly data or annual reports. Individuals are provided advance notice when income and resources change with due process, along with protections under the Fair Credit Reporting Act when "bad actors" report incorrect data.
6:07, I know how the BBA is supposed to work.
But practically speaking, if SSA gets a report from paychex that someone earned $1200 in a month and so cuts off their benefits,
a) how long are they going to have to wait until their request for recon and likely their ALJ hearing go forward (an especially painful wait if they took more than 10 days to appeal or appealed fast and SSA goofs and thus they don't have benefits pending the hearing)?
b) who is SSA going to believe, Paychex or the person who says "no I actually earned $120 that month"? Maybe sometimes they'll believe the beneficiary, especially if she brings a statement from her boss or whatever, but think about how little value the agency places on claimants' own statements compared to opinions of CEs and MC/PCs.
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